Proposed amended §134.402(f) requires that the reimbursement calculation used for establishing the MAR shall be the Medicare ASC reimbursement amount determined by applying the most recently adopted and effective Medicare Payment System Policies for Services Furnished in Ambulatory Surgical Centers and Outpatient Prospective Payment System reimbursement formula and factors as published annually in the Federal Register. Reimbursement shall be based on the fully implemented payment amount as in ADDENDUM AA, ASC COVERED SURGICAL PROCEDURES FOR CY 2008, as published in the November 27, 2007 publication of the Federal Register, or its successor.

Proposed new §134.402(f)(1) allows two payment structures. The first reimbursement for non-device intensive procedures is proposed to be the Medicare ASC facility reimbursement amount multiplied by 235 percent. In the alternative, if an ASC facility or surgical implant provider requests separate reimbursement for an implantable, reimbursement for the non-device intensive procedure is proposed to be the sum of two parts. The first part is the lesser of the manufacturer's invoice amount or the net amount (exclusive of rebates and discounts) plus 10 percent or $1,000 per billed item add-on, whichever is less, but not to exceed $2,000 in add-on's per admission. The second part is the Medicare ASC facility reimbursement amount multiplied by 153 percent.

Proposed new §134.402(f)(2) allows a proposed reimbursement for device intensive procedures to be the sum of the ASC device portion, and the ASC service portion multiplied by 235 percent. It also provides that if an ASC facility or surgical implant provider requests separate reimbursement for an implantable, reimbursement for the device intensive procedure shall be the sum of the lesser of the manufacturer's invoice amount or the net amount (exclusive of rebates and discounts) plus 10 percent or $1,000 per billed item add-on, whichever is less, but not to exceed in $2,000 in add-on's per admission and the ASC service portion multiplied by 235 percent.

Proposed amended §134.402(g) states that a facility, or surgical implant provider with written agreement of the facility, may request separate reimbursement for an implantable. Proposed amended §134.402(g)(1) provides that the facility or surgical implant provider requesting reimbursement for the implantable shall bill for the implantable on the Medicare-specific billing form for ASCs; attach a copy of the manufacturer's invoice, or vendor's invoice to the ASC facility or surgical implant provider; and include with the billing a certification that the amount billed represents the actual cost as specified in the text. Proposed new §134.402(g)(2) states that an insurance carrier may use the audit process under §133.230 (relating to Insurance Carrier Audit of a Medical Bill) to seek verification that the amount certified under paragraph (1) properly reflects the requirements of this subsection. Such verification may also take place in the Medical Dispute Resolution process under §133.307 (relating to MDR of Fee Dispute), if that process is properly requested, notwithstanding §133.307(d)(2)(B). Proposed new §134.402(g)(3) provides that nothing in the rule precludes an ASC or insurance carrier from utilizing a surgical implant provider to arrange for the provision of implantable devices and that implantables provided by such a surgical implant provider shall be reimbursed according to the subsection.

Proposed new §134.402(h) establishes that for medical services provided in an ASC, but not addressed in the Medicare payment policies as outlined in subsection (f) of the section, and for which Medicare reimburses using other Medicare fee schedules, reimbursement shall be made using the applicable Division Fee Guideline in effect for that service on the date the service was provided.

Proposed new §134.402(i) provides that if Medicare prohibits a service from being performed in an ASC setting, the insurance carrier, health care provider, and ASC may agree, on a voluntary basis, to an ASC facility setting. Proposed new §134.402(i)(1) states that the agreement may occur before or during preauthorization. Proposed amended subsection (i)(2) also sets forth that a preauthorization request may be submitted for an ASC setting only if an agreement has already been reached and a copy of the signed agreement is filed as a part of the preauthorization request. Proposed amended subsection (i)(3) provides that the agreement between the insurance carrier and the ASC must be in writing and include the reimbursement amount; any other provisions of the agreement; and names, titles, and signatures of both parties, with dates. Proposed amended subsection (i)(4) states that copies of the agreement are to be kept by both parties and that the agreement does not constitute a voluntary network established in accordance with Labor Code §413.011(d-1). Proposed amended (i)(5) provides that copies of the agreement are to be kept by both parties and that upon request of the Division, the agreement information shall be submitted in the form and manner prescribed by the Division.

Proposed new §134.402(j) establishes the severability of this section and states, if a court of competent jurisdiction holds that any provision of the section is inconsistent with any statutes of this state, are unconstitutional, or are invalid for any reason, the remaining provisions of the section shall remain in full effect.

Mr. Matthew Zurek, Executive Deputy Commissioner for Policy and Research, has determined that for each year of the first five years the proposed amended section will be in effect, there will be minimal fiscal implication for state government as a result of enforcing or administering the proposed amendments.

Increased costs may include expenses associated with the preparation of training materials and presentation of training programs for Division staff and other system participants, and costs associated with monitoring the Medicare payment policies. There will be no fiscal implications for local governments as a result of enforcing or administering the proposed amendments because they do not enforce or administer the rule.

Local government and state government as a covered regulated entity will be impacted in the same manner as persons required to comply with the proposed amendments, as described later in this preamble.

Mr. Zurek has also determined that for each year of the first five years the sections are in effect, the proposed amendments will not have a measurable effect on local employment or the local economy as a result of the proposed amendments.

Mr. Zurek has also determined that for each year of the first five years the sections are in effect, the public benefit anticipated is a reimbursement system with a well-known, standardized structure for delivery of quality medical care with effective cost control, that will provide positive benefits to all participants in the system: injured employees, employers, insurance carriers, and health care providers. The Division does not anticipate an increase in disputes as a result of this proposed amended rule because the Medicare reimbursement methodologies are well known and well documented. If an increase in dispute activity were to occur, it would likely be transient in nature. Reimbursement for some services will increase and some may decrease based on the new APC relativities. Aggregate medical costs will likely increase in the system, as these proposed amendments establish a reimbursement methodology and amount for services that are currently reimbursed in the aggregate at lower fees under the existing reimbursement methodology. Additionally, in establishing the fee guidelines, providers benefit from the increased security of payment afforded by the Labor Code.

Adoption of the most current Medicare ASC policies allows a broader range of services to be provided by ASCs. This may foster competition between various health care providers. This could lead to downward price pressures as well as quality improvements. A number of other factors could affect the impact including the frequency of injury, severity of injury, change in the practice of medicine for injured workers in Texas, distribution of services provided, current billing practices, and random fluctuations.

Use of standardized coding, reporting, billing, and reimbursement methodologies in the rules as proposed is expected to maintain consistency and standardization in the Texas workers' compensation system with the typical billing requirements used in Medicare and the group health systems.

Insurance carriers should not experience a significant increase in medical benefit costs as a result of increased unit prices. ASC costs directly related to historical Texas workers' compensation utilization are expected to increase approximately 23 percent in CY 2008, 38 percent in CY 2009, with increases in CY 2010 and CY 2011 limited to the annual increases made in the CPI-U which are incorporated in the Medicare ASC reimbursement rules. ASC reimbursement accounts for less than five percent of total Texas workers' compensation system medical benefit payments. Medical benefit impact is anticipated to average less than a one percent increase in medical benefit costs by the end of CY 2009. Any realignment of services to an ASC from a more expensive site of service as a result of the new reimbursement could potentially offset a portion of the increase.

Medical services are a significant portion of benefit costs employers pay through workers' compensation insurance premiums or directly through self-insurance programs. These amendments are unlikely to significantly impact overall medical costs, and employers should not see any increase in premium costs directly as a result of the proposed amendments. Improved access to ASC services for injured employees may provide indirect benefits to the employer. Benefits could include improved recovery and return to work outcomes that should be favorably reflected in the cost of doing business. In addition, the amended rule facilitates the appropriate use of all the resources available to health care providers.

Because the reimbursement methodology is based on the relative costs required to provide a service, reimbursements under the proposed amendments are more closely related to the resources required to provide the services. The alignment of ASC reimbursement with the most current Medicare ASC system yields more consistent reimbursement results and makes the Texas workers' compensation system more comparable to other health care systems and should discourage overutilization of services. This will benefit injured employees by preventing unnecessary treatment and delayed return to work.

Injured Employees

There will be no economic costs to injured employees, as this proposed rule does not impose any requirements on injured employees. Injured employees will have access to an expanded number of services that may be performed in the ASC setting. Additionally, injured employees will benefit from access to timely and quality medical care.

Employers

Employers who purchase workers' compensation insurance should experience no direct economic impact from the requirement to comply with these proposed rule amendments because there is no additional administrative requirement for the employer. However, employers are subject to premium rates that may be impacted by overall system costs. Since ASC services account for less than five percent of overall Texas workers' compensation medical benefit costs, the change in reimbursement structure is anticipated to increase overall reimbursement by less than two percent. The change in reimbursement structure and the expansion of services allowed to be performed in ASC settings is anticipated to increase ASC reimbursement. Some costs may be offset if services are shifted from other health care provider settings to a less costly ASC setting. Therefore, even though ASC facility reimbursement rates are proposed to be increased, the relatively small ASC volume combined with possible net savings from relocation of services to the less costly ASC setting, it is unlikely that premium costs will be negatively impacted in any significant amount.

Insurance Carriers

Insurance carriers have already incurred the start up costs for processing reimbursements on a basis consistent with Medicare, to comply with the previously adopted ASC rule and §134.403 of this title, so there should be minimal additional adjustment costs to process ASC claims under this proposal.

Most workers' compensation insurance carriers, including the 178 that qualify as small businesses in CY 2006, will experience an increase in medical benefit costs as a result of increased unit prices. These increases are dependent on an insurance carrier's specific mix of workers' compensation injuries, the severity of those injuries, health care providers rendering the services and past business practices.

Self-insured employers who self-administer and perform their own medical bill review should not experience significant costs related to compliance. These employers have already incurred the start up costs for processing reimbursements on a basis consistent with Medicare in order to comply with the current rule adopted in 2004 and in §134.403 of this title which uses the same grouping methodology, so there should be minimal additional adjustment costs to process ASC claims under this proposal.

Self-insured employers who outsource claims adjusting and/or medical bill review costs may be impacted based on their vendor relationships. If the vendor reprices bills for ASC services for commercial and/or workers' compensation patients, the costs should be minimal.

According to Division records, there are no self-insured employers that would be considered small or micro businesses. Therefore, there are no small or micro business self-insured employers impacted by these proposed amendments

Because the reimbursement methodology is based on the relative costs required to provide a service, reimbursements under the proposed amendments are more closely related to the resources required to provide the services. The alignment of ASC reimbursement with the Medicare system makes the Texas workers' compensation system more comparable to other health care systems and should discourage overutilization of services. Additionally, the adoption of the most current Medicare ASC reimbursement methodology better aligns all facility reimbursement structures and sets a general hierarchy of reimbursement relative to costs.

Health Care Providers

There are approximately 380 ASCs in Texas, of which approximately 127 are small businesses and approximately 187 are micro businesses.

Surgical implant providers that choose to directly bill a workers' compensation insurance carrier for the cost of implants may experience costs associated with Chapter 133 of this title. It is necessary that the sections in Chapter 133 apply to a billing party, because those sections provide the processes for bill auditing and dispute resolution.

Use of standardized coding, reporting, billing, and reimbursement methodologies in the rule as proposed is expected to decrease fee disputes within the workers' compensation system after a period of time for system participants to become familiar with the system.

Although some ASCs may not currently participate in the Medicare system, there are no additional requirements for these ASCs to bill for services provided in the Texas workers' compensation system. ASCs are instructed to bill their usual and customary charges; therefore ASCs are not required to calculate Medicare reimbursement in order to bill for services.

Doctors practicing in ASCs may derive organizational and operational benefits as a result of the proposed amended rule. The expanded list of services allowed in an ASC facility setting provides doctors with additional flexibility in scheduling their use of ASC facilities. Increased facility reimbursement for the previously approved procedures should allow doctors to schedule procedures that were not profitable for the ASC. The combination of these two factors may provide opportunities for doctors to coordinate their practice and further integrate care of injured employees with their group health practice patterns.

The Division estimates that the proposed amendment will result in an aggregate increase in ASC facility payments when applied to historical workers' compensation system ASC claim costs. Aggregate increase for ASC facility payments is approximately $5 million or 23 percent in CY 2008 and $14.9 million or 38 percent in CY 2009 when applied to historical workers' compensation ASC payments.

The Division projects a similar impact on future aggregate claim costs, assuming that there is not a significant shift in the distribution of claims. A number of other factors could affect the impact including frequency of injury, severity of injury, changes in the practice of medicine for injured workers in Texas, in part due to adoption of evidence-based treatment guidelines, distribution of services provided, current billing practices, and random fluctuations.

There will be no difference in the cost of compliance between a large, small or micro business as a result of the proposed amendments. Based upon the cost of labor per hour, there is no disproportionate economic impact on small or micro-businesses. Even if the proposed amendments would have an adverse effect on small or micro-businesses, it is neither legal nor feasible to waive the provisions of the proposed amendments for small or micro-businesses because the Labor Code requires equal application of these provisions to all affected entities and individuals.

The Division also considered not adopting the proposed amendments, implementing different requirements or standards for the affected small and micro-businesses, and exempting small and micro-businesses from the requirements of the proposed amendments.

Not adopting the proposal amendments. The Division rejected this approach because it would not comply with the requirements of Labor Code §413.011, which establishes the requirements for Division fee guidelines for medical services including adopting the most current reimbursement models and values or weights used by CMS.

Implementing different requirements or standards for the affected small or micro-businesses. The Division rejected this because the statutory framework of the Workers' Compensation Act and Division rules require a standardized reimbursement structure in order to maintain consistent access to care for injured employees.

Exempting small and micro-businesses from the requirements of the proposed amendments. The Division rejected this approach because it would neither comply with the requirements of Labor Code §413.011 nor the requirement to maintain a standardized reimbursement structure.

The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on July 14, 2008. Comments may be submitted via the Internet through the Division's Internet website at http://www.tdi.state.tx.us/wc/rules/proposedrules/toc.html or by mailing or delivering your comments to Victoria Ortega, Legal Services, MS-4D, Division of Workers' Compensation, Texas Department of Insurance, 7551 Metro Center Drive, Suite 100, Austin, Texas 78744.

The Commissioner will consider the proposed new section in a public hearing at 1:30 p.m. on July 1, 2008, in Room 1.107A, 7551 Metro Center Drive, Austin, Texas 78744. Written and oral comments presented at the hearing will be considered.

The amendments are proposed under the Texas Labor Code §§408.021, 408.027, 408.031, 413.002, 413.007, 413.011, 413.012, 413.0511, 413.013, 413.014, 413.015, 413.016, 413.017, 413.019, 413.031; 413.041, 413.053, 402.0111, and 402.061. Section 408.021 entitles injured employees to all health care reasonably required by the nature of the injury as and when needed. Section 408.027 sets out the process for payment of health care providers. Section 408.031 provides that an injured employee may receive benefits under a workers' compensation network established under Chapter 1305 of the Insurance Code. Section 413.002 requires the Division to monitor health care providers, insurance carriers and claimants to ensure compliance with rules adopted by the Commissioner of workers' compensation, including fee guidelines. Section 413.007 sets out information to be maintained by the Division. Section 413.011 mandates that the Division establish medical policies and guidelines by rule. Section 413.012 requires the Division to review and revise the medical policies and fee guidelines at least every two years to reflect fair and reasonable fees. Section 413.013 requires the Division by rule to establish programs related to health care treatments and services for dispute resolution, monitoring, and review. Section 413.014 requires preauthorization by the insurance carrier for health care treatments and services. Section 413.015 requires insurance carriers to pay charges for medical services as provided in the statute and requires that the Division ensure compliance with the medical policies and fee guidelines through audit and review. Section 413.016 provides for refund of payments made in violation of the medical policies and fee guidelines. Section 413.017 provides a presumption of reasonableness for medical services fees that are consistent with the medical policies and fee guidelines. Section 413.019 provides for payment of interest on delayed payments refunds or overpayments. Section 413.031 provides a procedure for medical dispute resolution. Section 413.041 requires health care practitioners and health care providers to submit certain financial disclosure information to the Division. Section 413.0511 requires the Medical Advisor to make recommendations regarding the adoption of rules and policies to develop, maintain, and review guidelines as provided by Section 413.011. Section 413.053 establishes the standards of reporting and billing. Section 402.00111 provides that the Commissioner of workers' compensation shall exercise all executive authority, including rulemaking authority, under the Labor Code and other laws of this state. Section 402.061 provides that the Commissioner of workers' compensation has the authority to adopt rules as necessary to implement and enforce the Texas Workers' Compensation Act.

The following statutes are affected by this proposal: Labor Code §§408.021, 408.027, 408.031, 413.002, 413.007, 413.011, 413.012, 413.013, 413.014, 413.015, 413.016, 413.017, 413.019, 413.031, 413.041 , 413.0511, and 413.053.